Correlation Between ECHO INVESTMENT and S A P

Can any of the company-specific risk be diversified away by investing in both ECHO INVESTMENT and S A P at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ECHO INVESTMENT and S A P into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ECHO INVESTMENT ZY and SAP SE, you can compare the effects of market volatilities on ECHO INVESTMENT and S A P and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ECHO INVESTMENT with a short position of S A P. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECHO INVESTMENT and S A P.

Diversification Opportunities for ECHO INVESTMENT and S A P

-0.41

Correlation Coefficient

ECHO INVESTMENT  S A P

Very good diversification

The 3 months correlation between ECHO and SAP is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding ECHO INVESTMENT ZY and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE and ECHO INVESTMENT is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ECHO INVESTMENT ZY are associated (or correlated) with S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of ECHO INVESTMENT i.e., ECHO INVESTMENT and S A P go up and down completely randomly.

Pair Corralation between ECHO INVESTMENT and S A P

Assuming the 90 days horizon ECHO INVESTMENT ZY is expected to under-perform the S A P. In addition to that, ECHO INVESTMENT is 1.0 times more volatile than SAP SE. It trades about -0.07 of its total potential returns per unit of risk. SAP SE is currently generating about 0.09 per unit of volatility. If you would invest  23,950  in SAP SE on December 26, 2024 and sell it today you would earn a total of  1,925  from holding SAP SE or generate 8.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ECHO INVESTMENT ZY  vs.  SAP SE

ECHO INVESTMENT ZY

Risk-Adjusted Performance

Very Weak

Over the last 90 days ECHO INVESTMENT ZY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

SAP SE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, S A P may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ECHO INVESTMENT and S A P

The main advantage of trading using opposite ECHO INVESTMENT and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECHO INVESTMENT position performs unexpectedly, S A P can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in S A P will offset losses from the drop in S A P's long position.

The idea behind ECHO INVESTMENT ZY and SAP SE pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.